Recession-Proof Businesses for Recession 2024: Rental Investing

by Patrick Freeze  7/02/2024

If you’re looking for recession-proof businesses that provide stable cash flow, there’s one option you can’t ignore. You need to consider investing in the real estate market. Particularly, rentals can be your best bet against economic turmoil. Learn below how to build a recession-resistant leasing income.

Main Takeaways

  • One of the most recession-proof businesses is rental investing. If you choose locations with good job growth, debt-to-income ratios, state GDP, and other factors, you can maintain profits in bad financial conditions.

How Do Recessions Impact Real Estate Investing?

Recessions can strike fear into even the most seasoned businessperson’s heart. Luckily, our North Virginia property management company knows all about factors that stay in investors’ favor, even in less-than-ideal economies.

First off, while recessions usually hit the stock market directly, they don’t typically affect the real estate market the same way. Yes, some of its negative effects may trickle down to the real estate market, but there usually isn’t much overlap. Luckily, even with those negatives (which we’ll get into), there are ways to offset the impact and make a profit.

The Recession and Home Sales

A 2024 recession could impact home sales. Unfortunately, many people would have less funds to buy homes. So, if you plan on buying and selling, a recession might not be the ideal time to do so unless you plan on significantly adding to its value or buying and holding it. However, if neither of those options suits you, there’s another, faster way to profit.

Renting Out Your Property: A Recession-Proof Business

Another alternative that could grant you an ROI sooner is buying a property to rent it out.

After all, if home prices drop, you may be able to secure properties at low prices you may normally be unable to obtain. To boot, no matter what happens to the economy, people will always need a roof over their heads to survive. That is just an irrefutable fact of life. Needless to say, this makes rental properties a fairly recession-proof business.

Plus, with multi-family rental properties, you can multiply your rental income. This gives you multiple streams of consistent cash flow.

That said, because people’s finances are tighter during recessions, you may have to tweak your rental rates to match what people can afford. If you plan carefully with the support of professionals, like property management teams, you can cultivate the ideal strategy for balancing affordability with profitability.

Ways to Find the Perfect Rental Property for Hard Times

If you want to succeed in the real estate market during a recession, there are vital location factors you must keep in mind. Write these strategies down:

Job Growth and Employment Rates

On a broader level, scrutinize areas for their employment rates and job growth outlooks. This will give you a forecast for the future on how many people are migrating in and out of the community. After all, if your tenants can’t find a stable income in your target area, they’ll move wherever they can find one.

Household Debt-to-Income Ratios

A location’s debt-to-income ratio will determine how resilient the households are against a recession. In other words, if the households have low debt compared to their income, they will be financially sturdier. In turn, they will find it easier to pay the rent.

Location Demand Levels

Search high and low for a real estate market that displays resilience, even in turbulent times. Don’t settle for less. Most directly, if you see that demand seems to be high or at least stable, that’s a good sign. This way, you can rest assured you’ll be able to keep rental rates at the level you want.

Affordability of Housing and Other Essentials

The better your area’s housing, gas, grocery, and other basic prices are, the more tenants will be attracted to it. It will easily stand out amongst the crowd in otherwise dreary times. On the contrary, if your area is unaffordable by recession standards, tenants won’t touch it with a ten-foot pole. As such, you should always keep these factors at the top of your mind for a recession-proof business.

Unemployment Insurance Coverage

It’s a good idea to examine how effective a state or city’s unemployment system is. All in all, the quality of a state or city’s employment insurance coverage helps dictate how well its residents can weather a recession.

State Income Tax Rates

If a state or city’s tax rates are lower, residents will have more cash flow to conserve against a recession. In the same vein, they’ll have more spare money to spend on their rent.

State GDP (Gross Domestic Product)

A state’s gross domestic product reflects its economic output. Naturally, a strong economic output will help your location’s economic machine run smoothly despite a recession.

Government Reserve Sizes

Study a state’s financial reserves and how they compare to government spending. This will indicate how well a state can stand on its own without the support of government funding.

Other Strategies for Success

Other than carefully scoping out your location, there are two other things you must do to maintain a recession-proof business. These tips can give you more security in changing times.

Keep Your Cash Close to Your Chest

In a recession, you should keep bigger cash reserves than you would otherwise. This is critical for a recession-proof business because it provides a plan B in case anything goes awry. In other words, cash reserves protect you from the volatility of your real estate market. Just in case inflation stays high, you should be prepared for whatever comes your way.

Timing is Everything

If you plan on getting loans to maintain or renovate your property, you should know about their changes in a recession.

At the beginning of a recession, loan rates could rise higher than what’s ideal. However, if you wait until the Federal Reserve adjusts its rate policies to match the recession era, you could get a better deal. So, stay aware that your timing matters when it comes to determining your overall loan cost.

Let Us Prepare Your Rental Business for the Unexpected

You can navigate a real estate market recession by choosing smart investments with similarly smart locations. By sticking to the strategies above, you can more easily find financially durable properties. Then, you can pull in a profit, even in the worst of times.

To really secure a recession-proof business, you can use the expertise of a professional property management team.

Property management professionals can run a fine comb through your expenses to help you cut corners without compromising quality. They can coordinate your property maintenance needs and tenant issues.

More specifically, property managers like us can handle your marketing efforts, so you don’t have to. We can feature you in our specialized rental listing database for tenants. As a bonus, we have connections throughout the real estate industry. So, we can score exclusive deals on property services you otherwise can’t access.

Contact us today to unlock the tools you need for true recession-proof properties.

 



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